What are the tax rules applicable to the PPF maturity product when you move abroad?



I moved to Singapore. I had invested in life insurance policies, NSCs, PPFs, and equity mutual funds when I was in India. Are the proceeds from the maturity / sale of these investments taxable?

Answer: The tax liability for the investment products you mention is the same whether you are a resident or a non-resident. The maturity proceeds of a life insurance policy are exempt from tax under section 10 (10 (d)) if the premium paid for the life insurance policy has not exceeded 10% of the sum insured during one of the premium payment years.

The PPF account maturity product is completely tax free in your hands. However, you are not allowed to extend the term of your PPF account beyond its initial term of 15 years. In case the same has already been extended while you were in India, you cannot extend it beyond the current five year extension period.

Profits made on equity-focused mutual funds are taxed at a fixed rate of 15% if they are repaid within one year. If the investment in stock plans is held for more than a year, these are treated as long-term capital gains. On long-term capital gains on stock plans as well as long-term capital gains on listed stocks, you get exemption for initial rupees one lakhs and beyond, they are taxed at the flat rate of 10% without any indexation advantage.

Interest on NSC may be offered for tax on a receipt or accrual basis. In case you offer it for tax on an accrual basis, you get the deduction under Section 80C for accrued interest on NSC for all years except the year in which it expires, as accrued interest is presumed to have been reinvested.

Balwant Jain is a tax and investment expert and can be reached at [email protected]

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